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Found 491 article(s) in category 'Q4: Financial Crisis?'

HOW DO WE PREVENT THE NEXT FINANCIAL CRISIS?

The posts collected here explore the causes of the global financial crisis and its short- and long-term consequences. They include a multitude of proposals for preventing and mitigating financial crises in the future.

Effects of Austerity: Expenditure- and Tax-based Approaches. Alberto Alesina, Spring 2019, Paper, “Sometimes governments need to reduce their budget deficits aggressively. These policies are labeled “austerity.” Almost always austerity is needed because excessive debt has been accumulated, as a result of policy mistakes and political distortions (Alesina and Passalacqua 2016; Yared, in this issue). The austerity policies embraced by several European countries starting in 2010 have generated an extraordinarily harsh policy debate. One side has argued that austerity is (almost) always a bad idea. From this perspective, even European countries that were experiencing serious difficulties in financial markets—either by being totally cut off from borrowing like Greece, or by paying high risk premia like Portugal, Spain, Ireland, and Italy—should have continued to stimulate their economies with high levels of government spending. Austerity, the argument continues, was self-defeating because the recessions it induced, or extended, only increased government debt as a ratio of GDP. Blanchard and Leigh (2014) argued that this round of austerity was particularly costly: in other words, fiscal multipliers were especially high. The other side argued that postponing austerity would have caused Effects.” Link

What a wise US-China trade deal looks like? Full of trade-offs. Kenneth Rogoff, May 8, 2019, Opinion, “Will a possibly imminent US-China trade agreement exacerbate global business cycles or even plant the seeds of the next Asian financial crisis? If the eventual agreement – assuming there is one – forces China to hew indefinitely to its outmoded, overly rigid exchange-rate regime, then the answer may be yes.” Link

An economist explains what happens if there’s another financial crisis. Kenneth Rogoff, April 30, 2019, Opinion, “The financial crisis of 2008 may have started in the US banking sector but it went on to unleash the deepest global recession since the Great Depression. The year 2009 became the first on record where global GDP contracted in real terms and the lost growth resulting from the crisis and ensuing recession has been estimated at over $10 trillion (more than one-sixth of global GDP in 2008).” Link

Evolution or Revolution? Rethinking Macroeconomic Policy after the Great Recession. Lawrence Summers, 2019, Book, “Leading economists discuss post–financial crisis policy dilemmas, including the dangers of complacency in a period of relative stability. The Great Depression led to the Keynesian revolution and dramatic shifts in macroeconomic theory and macroeconomic policy. Similarly, the stagflation of the 1970s led to the adoption of the natural rate hypothesis and to a major reassessment of the role of macroeconomic policy. Should the financial crisis and the Great Recession lead to yet another major reassessment, to another intellectual revolution? Will it? If so, what form should it, or will it, take? These are the questions taken up in this book, in a series of contributions by policymakers and academics. The contributors discuss the complex role of the financial sector, the relative roles of monetary and fiscal policy, the limits of monetary policy to address financial stability, the need for fiscal policy to play a more active role in stabilization, and the relative roles of financial regulation and macroprudential tools. The general message is a warning against going back to precrisis ways—to narrow inflation targeting, little use of fiscal policy for stabilization, and insufficient financial regulation.” Link

Ricardo Hausmann on Venezuela, Inequality in Productivity, and Policy Lessons for International Development March 2019. GrowthPolicy’s Devjani Roy interviewed Ricardo Hausmann, Professor of the Practice of Economic Development at Harvard Kennedy School and Director of the Center for International Development at Harvard University, on Venezuela, inequality in productivity, and policy lessons for international development. | […]

Jordan: The Elements of a Growth Strategy. Ricardo Hausmann, Tim O’Brien, Miguel Angel Santos, 2019, Paper, “In the decade prior to the global financial crisis of 2008-2009, Jordan enjoyed a period of impressive macroeconomic performance. The prolonged expansion was export-led, with total exports of goods and services tripling over that period. The boom was not only due to better prices for Jordan’s exports, as there were also significant gains in global market share of Jordan’s garment, agriculture and chemical exports. Throughout these years, the country ran large current account deficits that were largely financed by massive inflows of foreign direct investment (FDI) coming from the United Arab Emirates, United States, India, Bahrain and Saudi Arabia. By 2009, the size of total public debt was moderate, at 55% of the size of the economy. The Global Financial Crisis of 2008-2009 and a series of subsequent negative external shocks affected Jordan in significant ways, throwing its economy out of balance. Conflict in neighboring countries led to reduced demand from key export markets and cut off important trade routes. FDI, which averaged 12.7% of gross domestic product (GDP) over the period 2003-2009, fell to 5.1% of GDP over the period of 2010-2017. At the same time, they brought a massive wave of migrants and refugees, resulting in a net population increase of 50.4% between 2008 and 2017.” Link

Behind the Scenes with Harvard’s Martin Feldstein. Martin Feldstein, February 27, 2019, Audio, “Bloomberg Surveillance’s Tom Keene sits down with Harvard University George F. Baker Professor of Economics Martin Feldstein to discuss his work in Washington with President Reagan, the importance of introductory economics courses, and his time as an undergraduate at Harvard University.” Link

Jeremy Stein on income inequality, monetary policy and the bond market, and preventing the next financial crisis February 2019. GrowthPolicy’s Devjani Roy interviewed Jeremy Stein, the Moise Y. Safra Professor of Economics and Chairman of the Department of Economics at Harvard University, on income inequality, monetary policy and the bond market, and preventing the next […]

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